Corporation Tax (Northern Ireland) Bill (HC Bill 149)

Corporation Tax (Northern Ireland) BillPage 70

“Northern Ireland Chapter 7 firm” for any purpose for which that
section applies.

6C NI rate activity”

(1) In this Act “NI rate activity” means—

(a) 5a qualifying trade carried on by a Northern Ireland SME
company, except to the extent that it is an excluded activity,

(b) a qualifying trade, other than an excluded financial trade,
carried on by a NIRE company, to the extent that the trade—

(i) is carried on through a Northern Ireland regional
10establishment of the company, and

(ii) does not consist of an excluded activity,

(c) the back-office activities of an excluded financial trade
carried on by a Northern Ireland SME which has made an
election for the purposes of section 357KB(2) of CTA 2010,

(d) 15the back-office activities of an excluded financial trade
carried on by a NIRE company which has made an election
for the purposes of section 357KB(2) of CTA 2010 to the extent
that those activities are carried on through the Northern
Ireland regional establishment of the company,

(e) 20a qualifying partnership trade carried on by a Northern
Ireland Chapter 6 firm, except to the extent that it is an
excluded activity,

(f) a qualifying partnership trade, other than an excluded
financial trade, carried on by a Northern Ireland Chapter 7
25firm, to the extent that the trade—

(i) is carried on through a Northern Ireland regional
establishment of the partnership, and

(ii) does not consist of an excluded activity,

(g) the back-office activities of an excluded financial trade
30carried on by a Northern Ireland Chapter 6 firm which has
made an election for the purposes of section 357WB(2) of
CTA 2010, or

(h) the back-office activities of an excluded financial trade
carried on by a Northern Ireland Chapter 7 firm which has
35made an election for the purposes of section 357WB(2) of
CTA 2010, to the extent that those activities are carried on
through the Northern Ireland regional establishment of the
partnership.

(2) In subsection (1)

  • 40“back-office activities” has the same meaning as in Part 8B of
    CTA 2010 (see section 357XI of that Act);

  • “excluded financial trade” means a trade that is an excluded
    trade for the purposes of Part 8B of CTA 2010 merely because
    it falls within one or more of the following provisions of that
    45Act—

    (a)

    section 357XB (lending and investment),

    (b)

    section 357XC (investment management), or

    (c)

    section 357XE (re-insurance trade);

  • “Northern Ireland regional establishment” has the same
    50meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part

    Corporation Tax (Northern Ireland) BillPage 71

    as read, in relation to a partnership, with section 357WA(4) of
    that Act);

  • “qualifying partnership trade” has the same meaning as in Part
    8B of CTA 2010 (see section 357WB of that Act);

  • 5“qualifying trade” has the same meaning as in Part 8B of CTA
    2010 (see section 357KB of that Act).

6D NI rate activity treated as separate trade

(1) For the purposes of this Act, the NI rate activity carried on by a
Northern Ireland SME company or a large Northern Ireland
10company is to be treated as a separate trade, distinct from any other
activities carried on by the company as part of the trade.

(2) For the purposes of the corporate partner calculation, the NI rate
activity carried on by a Northern Ireland firm is to be treated as a
separate trade, distinct from any other activities carried on by the
15firm as part of the trade.

(3) In this Act “the corporate partner calculation”, in relation to a trade
carried on by a Northern Ireland firm, means the determination of
the allowances and charges to which effect is to be given under this
Act in determining under subsection (3) or (4) of section 1259 of CTA
202009 (calculation of firm’s profits and losses) the amount of the
profits of the trade chargeable to corporation tax.

6E Giving effect to allowances and charges: NI rate activity cases

(1) This section applies if a Northern Ireland SME company or a NIRE
company is entitled or liable to—

(a) 25an allowance or charge under Part 2 (plant and machinery
allowances) where the qualifying activity is a trade,

(b) an allowance or charge under Part 3A (business premises
renovation allowances),

(c) an allowance or charge under Part 5 (mineral extraction
30allowances),

(d) an allowance or charge under Part 6 (research and
development), or

(e) an allowance under Part 9 (dredging allowances).

(2) For the purposes of the corporate partner calculation, this section
35also applies if a Northern Ireland firm is entitled or liable to an
allowance or charge falling within any of subsection (1)(a) to (e).

(3) The allowance or charge is to be given effect in calculating the profits
of the trade, by treating—

(a) the allowance as an expense of the trade, and

(b) 40the charge as a receipt of the trade.

(4) If the allowance or charge relates to an NI rate activity, it is treated
for the purposes of Part 8B of CTA 2010 (trading profits taxable at the
Northern Ireland rate) as forming part of the Northern Ireland
profits or Northern Ireland losses of the trade.

(5) 45If the allowance or charge relates to a main rate activity, it is treated
for the purposes of Part 8B of CTA 2010 as forming part of the
mainstream profits or mainstream losses of the trade.

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(6) In this section—

(a) “the trade” means the trade carried on by the company or
partnership (disregarding for this purpose section 6D), and

(b) “main rate activity” means so much of the trade as is not an
5NI rate activity.

Part 3 Amendments of Part 2 of CAA 2001: plant and machinery allowances

3 (1) Section 12 (expenditure incurred before qualifying activity carried on) is
amended as follows.

(2) 10The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

(2) Subsection (3) applies if—

(a) a company that does not have a Northern Ireland regional
establishment incurs expenditure for the purposes of a trade,

(b) 15the activities for the purposes of which the expenditure is
incurred would, if the company were a NIRE company, be an
NI rate activity treated as a separate trade, and

(c) the company subsequently becomes a NIRE company.

(3) The expenditure is to be treated as incurred on the first day of the
20first chargeable period in which the company is a NIRE company.

(4) Subsection (5) applies if—

(a) a partnership that does not have a Northern Ireland regional
establishment incurs expenditure for the purpose of a trade,

(b) the activities for the purposes of which the expenditure is
25incurred would, if the partnership were a Northern Ireland
Chapter 7 firm, be an NI rate activity treated as a separate
trade, and

(c) the partnership subsequently becomes a Northern Ireland
Chapter 7 firm.

(5) 30The expenditure is to be treated for the purposes of this Part so far as
relating to the corporate partner calculation as incurred on the first
day of the first chargeable period in which the partnership is a
Northern Ireland Chapter 7 firm.

(6) In this section “Northern Ireland regional establishment” has the
35same meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part
as read, in relation to a partnership, with section 357WA(4) of that
Act).

4 In section 15 (qualifying activities), after subsection (2) insert—

(2ZA) Where an activity of a company is treated by subsection (1) of section
406D (NI rate activity treated as separate trade) as a separate trade, that
activity is an activity separate from any other activity of the
company.

(2ZB) Where an activity of a Northern Ireland firm is treated by subsection
(2) of section 6D as a separate trade for the purposes of the corporate

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partner calculation, that activity is for the purposes of this Part, so far
as relating to the corporate partner calculation, an activity separate
from every other activity of the Northern Ireland firm.

5 After section 51J insert—

51JA 5  Sixth restriction: allocation where profits chargeable at NI rate

(1) This section applies if—

(a) section 51B, 51C, 51D or 51E applies, and

(b) the relevant AIA qualifying expenditure for the purposes of
the section in question includes expenditure incurred in a
10low-rate year in respect of an NI rate activity.

(2) For the purposes of this section expenditure is “incurred in a low-rate
year” if it is incurred in a financial year for which the Northern
Ireland rate is lower than the main rate.

(3) The maximum annual investment allowance that may be allocated
15under section 51B, 51C, 51D or 51E to AIA qualifying expenditure
incurred in a low-rate year in respect of qualifying activities other
than NI rate activities is determined by the formula—


where—

  • 20A is the amount of the single annual investment allowance that
    would otherwise be available for allocation;

  • T is so much of the relevant AIA qualifying expenditure for the
    purposes of the section in question as is incurred in a low-rate
    year;

  • 25NI is so much of the relevant AIA qualifying expenditure for the
    purposes of the section in question as is expenditure incurred
    in a low-rate year in respect of an NI rate activity.

6 (1) Section 61 (disposal events and disposal values) is amended as follows.

(2) In the Table in subsection (2)—

(a) 30in item 1, in the first column, after “item 2” insert “or 2A”, and

(b) after item 2 insert—

2A. Sale of the plant or machinery
where— the sale is at less than
market value, the condition in subsection
(4A) is met by the seller, and the condition in subsection
(4B) is met by the buyer.
The market value of the
plant or machinery at the
time of the sale.

(3) 35After subsection (4) insert—

(4A) The condition referred to in paragraph (b) of item 2A in the Table is
met by the seller if—

(a) the seller is—

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(i) a company, or

(ii) a partnership whose partners include one or more
companies, and

(b) before the sale the plant or machinery is used wholly or
5partly for the purposes of a qualifying activity that is not an
NI rate activity.

(4B) The condition referred to in paragraph (c) of item 2A in the Table is
met by the buyer if—

(a) the buyer is a Northern Ireland SME company, a NIRE
10company or a Northern Ireland firm in the chargeable period
of the buyer in which the plant or machinery is bought,

(b) the buyer’s expenditure on the acquisition of the plant or
machinery is qualifying expenditure under this Part or Part 6
(research and development allowances), and

(c) 15the plant or machinery is used by the buyer wholly or partly
for the purposes of an NI rate activity.

7 After section 66A insert—

Effect of changes in Northern Ireland status of SME company or SME partnership

66B SME company entering NI corporation tax regime

(1) 20This section applies if—

(a) in a chargeable period beginning after the commencement
day (“the relevant period”) a company is a Northern Ireland
SME company,

(b) the company was neither a Northern Ireland SME company
25nor a NIRE company in the previous chargeable period, and

(c) the company has not become a Northern Ireland SME
company in the relevant period as a result of an election
under section 357KB(2) of CTA 2010 (back-office activities of
financial trades).

(2) 30The fact that assets which continue to be used in the relevant period
for the purposes of the trade actually carried on by the company are
as a result of section 15(2ZA) treated as ceasing to be used for the
purposes of a main rate activity and beginning to be used for the
purposes of an NI rate activity does not give rise to a disposal event
35within 61(1)(e) or (f).

(3) If during the relevant period the only qualifying activity carried on
by the company is an NI rate activity, the amount of any unrelieved
qualifying expenditure in any main pool or special rate pool falling
to be carried forward to the relevant period is to be treated as relating
40to plant and machinery used for the purposes of the NI rate activity.

(4) If during the relevant period the company carries on both an NI rate
activity and a main rate activity—

(a) the amount of any unrelieved qualifying expenditure in any
main pool falling to be carried forward under section 59 to
45the relevant period is to be apportioned on a just and
reasonable basis to become—

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(i) a main pool that is to be treated as relating to plant
and machinery used for the purposes of the NI rate
activity, and

(ii) a main pool that is to be treated as relating to plant
5and machinery used for the purposes of the main rate
activity, and

(b) the amount of any unrelieved qualifying expenditure in any
special rate pool falling to be carried forward under section
59 to the relevant period is to be apportioned on a just and
10reasonable basis to become—

(i) a special rate pool that is to be treated as relating to
plant and machinery used for the purposes of the NI
rate activity, and

(ii) a special rate pool that is to be treated as relating to
15plant and machinery used for the purposes of the
main rate activity.

(5) “Main rate activity” means the company’s trade except so far as it is
an NI rate activity.

(6) “The commencement day” has the meaning given by section 5(4) of
20the Corporation Tax (Northern Ireland) Act 2015.

66C SME partnership entering NI corporation tax regime

For the purposes of the corporate partner calculation, section 66B
applies in relation to a partnership as if—

(a) references to a company were references to a partnership,

(b) 25references to a Northern Ireland SME company were
references to a Northern Ireland Chapter 6 firm,

(c) the reference to a NIRE company were a reference to a
Northern Ireland Chapter 7 firm,

(d) the reference to section 357KB(2) of CTA 2010 were a
30reference to section 357WB(2) of that Act, and

(e) the reference to section 15(2ZA) were a reference to section
15(2ZB).

66D SME company leaving NI corporation tax regime

(1) This section applies if—

(a) 35in a chargeable period beginning after the commencement
day (“the relevant period”) a company is neither a Northern
Ireland SME company nor a NIRE company,

(b) the company was a Northern Ireland SME company in the
previous chargeable period, and

(c) 40during the relevant period the company carries on a
qualifying activity.

(2) The fact that assets which continue to be used in the relevant period
for the purposes of the trade actually carried on are as a result of
section 15(2ZA) treated as ceasing to be used for the purposes of an
45NI rate activity and beginning to be used for the purposes of the
qualifying activity mentioned in subsection (1)(c) does not give rise
to a disposal event within 61(1)(e) or (f).

(3) Any unrelieved qualifying expenditure which—

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(a) relates to plant or machinery used for the purposes of an NI
activity, and

(b) falls to be carried forward to the relevant period,

is to be treated as relating to the qualifying activity that the company
5carries on in the relevant period.

(4) “The commencement day” has the meaning given by section 5(4) of
the Corporation Tax (Northern Ireland) Act 2015.

66E SME partnership leaving NI corporation tax regime

For the purposes of the corporate partner calculation, section 66D
10applies in relation to a partnership as if—

(a) references to a company were references to a partnership,

(b) references to a Northern Ireland SME company were
references to a Northern Ireland Chapter 6 firm,

(c) the reference to a NIRE company were a reference to a
15Northern Ireland Chapter 7 firm, and

(d) the reference to section 15(2ZA) were a reference to section
15(2ZB).

8 After section 212 insert—

Chapter 16ZA

Asset provided or used only partly for NI rate activity

212ZA   Apportionment of expenditure incurred partly for NI rate activity

(1) 20If in a chargeable period a company has incurred qualifying
expenditure on the provision of plant or machinery—

(a) partly for the purposes of an NI rate activity, and

(b) partly for the purposes of a main rate activity,

then for the purposes of any annual investment allowance or first
25year allowance to which the company is entitled the expenditure is
to be apportioned between the NI rate activity and the main rate
activity on a basis which is just and reasonable having regard to the
relevant circumstances.

(2) The relevant circumstances include, in particular, the extent to which
30it appears that the plant or machinery is likely to be used for
purposes of the NI rate activity and the extent to which it appears
that it is likely to be used for the main rate activity.

(3) If the allowance falls to be reduced under section 205 or 210, it is the
reduced amount that is apportioned under subsection (1).

212ZB 35  Single asset pool etc

(1) Qualifying expenditure to which this subsection applies, if allocated
to a pool, must be allocated to a single asset pool.

(2) Subsection (1) applies to qualifying expenditure incurred by a
company carrying on both an NI rate activity and a main rate activity
40where the expenditure is incurred—

(a) partly for the purposes of the NI rate activity, and

(b) partly for the purposes of the main rate activity.

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(3) If a company is required to bring a disposal value into account in a
pool for a chargeable period because the plant or machinery begins
to be used for the purposes of an NI rate activity as well as for the
purposes of a main rate activity, or begins to be used for the purposes
5of a main rate activity as well as for the purposes of an NI rate
activity, an amount equal to that disposal value is allocated (as
expenditure on the plant or machinery) to a single asset pool for that
chargeable period.

(4) In the case of a single asset pool under subsection (1) or (3), there is
10no disposal event merely because the plant or machinery begins to be
used to a greater extent for the purposes of the NI rate activity or for
the purposes of the main rate activity.

212ZC   Allowances and charges on expenditure in single asset pool

(1) This section applies if a company’s expenditure is in a single asset
15pool under section 212ZB(1) or (3).

(2) The amount of—

(a) any writing-down allowance or balancing allowance to
which the company is entitled, or

(b) any balancing charge to which the company is liable,

20is to be apportioned between the NI rate activity and the main rate
activity on a basis which is just and reasonable having regard to the
relevant circumstances.

(3) The relevant circumstances include, in particular, the extent to which
it appears that the plant or machinery was used in the chargeable
25period in question for the purposes of the NI rate activity and the
extent to which it was used in the chargeable period in question for
the purposes of the main rate activity.

212ZD   Effect of significant change in balance of use

(1) This section applies if—

(a) 30expenditure is allocated to a single asset pool under this
Chapter,

(b) there is such a change of circumstances as would make it
appropriate for any apportionment falling to be made under
section 212ZC—

(i) 35for the chargeable period in which the change takes
place (“the relevant chargeable period”), or

(ii) for any subsequent chargeable period,

to be substantially different from the apportionment that
would have been appropriate apart from the change,

(c) 40no disposal value in respect of the plant and machinery
would, apart from this section, fall to be brought into account
for the relevant chargeable period, and

(d) the market value of the plant and machinery at the end of the
relevant chargeable period exceeds the available qualifying
45expenditure by more than £1 million.

(2) If this section applies—

(a) a disposal value is required to be brought into account in the
single asset pool for the relevant chargeable period, and

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(b) section 212ZA applies as if, at the beginning of the following
chargeable period, expenditure has been incurred on the
provision of the plant or machinery of an amount equal to the
disposal value brought into account as a result of paragraph
5(a).

212ZE   Application of Chapter to partnerships

For the purposes of the corporate partner calculation, this Chapter
applies in relation to partnerships as if—

(a) references to a company were references to a partnership,

(b) 10references to a Northern Ireland SME company were
references to a Northern Ireland Chapter 6 firm,

(c) references to a NIRE company were references to a Northern
Ireland Chapter 7 firm, and

(d) the reference in section 212ZA(1) to an annual investment
15allowance were omitted.

212ZF    “Main rate activity”

In this Chapter “main rate activity” means an activity other than an
an NI rate activity.

9 In section 247 (giving effect to allowances and charges: trades), after
20subsection (1) insert—

(1A) Subsection (1) is subject to section 6E (giving effect to allowances and
charges: NI rate activity cases).

10 In Schedule A1 (first year tax credits), in paragraph 2, after sub-paragraph
(3) insert—

(4) 25The Treasury may by order—

(a) amend sub-paragraph (1) so as to provide for a different
percentage to apply where the surrenderable loss relates to a
qualifying activity that is an NI rate activity, and

(b) substitute for any percentage for the time being specified in
30sub-paragraph (1) such other percentage as the Treasury
thinks fit.

Part 4 Amendments of CAA 2001 relating to other allowances

Business premises renovation allowances

11 (1) 35Section 360Z (giving effect to allowances and charges: trades) is amended as
follows.

(2) In subsection (3), for the words from “subject to” onwards substitute “subject
to—

(a) section 6E (giving effect to allowances and charges: NI rate
40activity cases), and

(b) the following provisions of this Chapter.

(3) After that subsection insert—

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(4) If a company or partnership is as a result of section 6D (NI rate
activity treated as separate trade) treated for the purposes of this Act
as carrying on two separate trades, the question of whether an
allowance or charge relates to the NI rate activity or the main rate
5activity is to be determined by reference to the purposes for which
the qualifying building is used.

(5) If the qualifying building is used both for the purposes of the NI rate
activity and for the purposes of the main rate activity, allowances
and charges are to be apportioned on a just and reasonable basis
10between the trade consisting of the NI rate activity and the trade
consisting of the main rate activity, according to the proportion of
use for the purposes of the NI rate activity.

(6) In this section “main rate activity” means an activity other than an NI
rate activity.

15Mineral extraction allowances

12 In section 394 (mineral extraction allowances), after subsection (2) insert—

(2A) If a company or partnership is as a result of section 6D (NI rate
activity treated as separate trade) treated for the purposes of this Act
as carrying on two separate trades, each of them is for the purposes
20of this Part to be treated as a mineral extraction trade if the separate
trades would together be so treated.

13 (1) Section 432 (giving effect to allowances and charges) is amended as follows.

(2) The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

(2) 25This section is subject to section 6E (giving effect to allowances and
charges: NI rate activity cases).

Research and development

14 After section 439 insert—

439A   Qualifying expenditure incurred for purposes of NI rate activity

(1) 30Subsection (2) applies if—

(a) a company that does not have a Northern Ireland regional
establishment incurs expenditure for the purposes of a trade,

(b) the activities for the purposes of which the expenditure is
incurred would, if the company were a NIRE company, be an
35NI rate activity treated as a separate trade, and

(c) the company subsequently becomes a NIRE company.

(2) The expenditure is to be treated as incurred on the first day of the
first chargeable period in which the company is a NIRE company.

(3) Subsection (4) applies if—

(a) 40a partnership that does not have a Northern Ireland regional
establishment incurs expenditure for the purposes of a trade,

(b) the activities for the purposes of which the expenditure is
incurred would, if the partnership were a Northern Ireland